Frederick City Mayor Michael O’Connor says the property tax reevaluation currently underway will determine approximately 70% of the city’s budget for the next three years.

The property tax reevaluation is conducted by Maryland Department of Assessments and Taxation (SDAT) on a triennial basis, meaning it occurs once every three years. Each Maryland county is divided into three districts, allowing for one district to be reevaluated each year.

Frederick City residents will receive notice of their reevaluation by the end of December, which serves as an estimation of the fair market value of their property. Any changes to the previous year will be listed, which can be appealed within a 45 day deadline.

As far back as 2017, Frederick has maintained a consistent tax rate, even lowering it to $0.70 per $100 of assessed value. Frederick City Mayor Michael O’Connor said the city has kept its tax rate stable because property values in Frederick are going up.

Yet, as the value of a home goes up, O’Connor acknowledges the cost of living becomes more expensive. Whatever form it takes, he said it can become the question of if your income can go as far as it did before.

The Mayor said relying so heavily on property tax can exacerbate the issue of affordable housing. “Because you’re seeing homes continue to appreciate in value, which means they cost more to buy, rents are higher, mortgages are higher, and…property tax assessments are going to go up as a result of that,” O’Connor said.

The Big Picture

O’Connor has become a proponent for changing the way local governments are allowed to collect revenue. He said it has been nearly 60 years since the Maryland General Assembly has made meaningful changes to the process.

One solution, O’Connor proposed, would be to allow local governments to get more of the state sales tax and other revenue sources. He hopes the General Assembly will consider this when it convenes next month. “It starts with at least getting the leaders of the relevant committees and the presiding officers in the Maryland House and the Senate and the administration on board with the idea that this is a conversation worth having,” O’Connor explained

O’Connor said there are both benefits and drawbacks to having a system that so heavily relies on one form of revenue. Pointing to 2020, when the Covid pandemic hit and smaller forms of revenue took a hit, he said the city was not as affected.

However, more times than not, the Mayor said that the same dependence comes at the city’s detriment, especially when property values themselves are what takes the hit. He said the 2008 recession is one such example. “Relying so heavily on one source of revenue…at that time had a real impact on the city’s budget and the way in which it could function,” O’Connor said.

As it currently stands, if property values continue to rise as they have for several years, O’Connor said Frederick could have additional income for the FY27 budget. Alternatively, if the city were to see a sudden drop, it could force officials to cut programs and tighten the belt.

The Need-to-Know

Frederick City residents will receive a notice from the SDAT which outlines the estimated fair market value of their property. This includes an estimation of both the land itself and any properties on, or “improvements” made, to the land.

The SDAT’s assessors are trained to use two methods when appraising property, known as the cost approach and sales approach. Maryland assessors are trained to use a combination of both systems

The cost approach asks what other similar quality properties have sold for and assumes a given property will sell for the same amount. Alternatively, the sales approach looks at how much it would cost to build a similar improvement, subtracts the age and condition of the property and adds the value of the land.

Modifiers can also be applied to the value of property, such as regional differences in cost, the quality of the dwelling and the value of surrounding properties. Changes to the value of a property must be “phased-in” over a three year period. Should a property go from $70,000 to $100,000, a landowner would pay an additional $10,000 each year until the full value is reached.

Landowners can appeal a reevaluation if they feel there has been an error in the process, but have a limited window of 45 days to do so.

Federal Challenges

Making Frederick's budget all the more challenging, O’Connor said the federal government has pulled away from responsibilities local jurisdictions were told they could count on.

The Mayor explained the City’s Department of Housing and Human Services has felt this the most. This has included housing support, permanent housing and funding for SNAP. “When funding in those areas at the federal level decreases, it doesn’t decrease the need for people to have a place to live,” O’Connor argued.

When federal funding is cut, O’Connor explained the city is not scaled to address such an influx of residents seeking help. While Frederick can plan in advance, he argued a $1 loss in federal funding cannot be matched by a $1 increase in city funding in order to make up the full gap.

O’Connor said that, when designing the current year’s budget, Frederick anticipated loss of funding of various programs. In order to buffer against those deficits, he said the city ensured adequate funding was put into programs they thought might be cut.